Factors to consider when choosing a mortgage

It can be hard to know whether to choose an interest-only or a repayment mortgage, but there are several factors that you should consider before making your final decision. To start with, an interest only mortgage will be able to offer you lower repayments on a monthly basis, but most likely you will not actually touch anything on your loan.

Therefore, you are never going to get any equity in your home since you will not be touching the principal and down the line if you need more funds this may be a problem. Most people think that when choosing a mortgage the only thing they need to worry about is whether they want a variable or a fixed rate, but there are other factors that are just as important.

You also need to think about if you want an interest free loan or not. Both of these types of mortgages will allow a borrower to pay back the capital debt as well as the interest that is accrued on the debt, but the main difference is the way that the capital debt is addressed and the amount that at the end of the term must be repaid.

To shorten the matter, a repayment mortgage essentially dictates that you pay a single payment that is made up with some of the capital debt and some of the interest. As you continue to pay your debt the interest you pay will actually go down because you will have less capital debt for it to be charged from.

On the other hand, an interest-only mortgage means you only pay the interest every month. This means you will never pay back the capital debt which allows your payment to be lower, but also means you will never actually end the mortgage.


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